India’s PLI scheme for IT hardware hit by 30% duty on PCBs

Under India’s production-linked incentive (PLI) scheme for IT hardware, companies are grappling with an unexpected hurdle: A newly imposed 30 per cent anti-dumping duty (ADD) on bare printed-circuit boards (PCBs). This duty, effective for five years since March, has sparked concerns among industry leaders who argue that it undermines the global competitiveness of their products.

“The ADD levied on imported PCBs increases the production cost of domestically manufactured PLI scheme products, making them less competitive in the global market,” an industry executive said.

Industry insiders also highlighted that the impact varies across different products- a 3-4 per cent rise for lighting products, 1 per cent for IT hardware, and 2-3 per cent for telecom products. This levy is particularly detrimental to firms involved in local PCB assembly, a requirement under the revised IT hardware PLI scheme.

Some prominent 27 companies, including Dell, HP, Dixon Technologies, Lava, Foxconn, Lenovo and Optiemus have committed to manufacturing IT hardware under this revised scheme, which mandates localisation such as PCB assembly within the first operational year.

“PLI 2.0 requires PCBA as value addition starting from the first year and allows for incentives for the same… However, the ADD notification imposes an additional custom duty for import of bare PCB while exempting PCBA from this duty,” noted the industry executive.

Industry voices have urged the commerce ministry to reconsider the ADD policy, advocating for exemptions or reduced duties for products supported by PLI initiatives. Notably, mobile phone manufacturers are exempt from this duty, whereas more complex PCB designs are also spared.

However, for IT hardware brands, the duty has presented a quandary. “My costs have gone up because of that [the duty], and it is also counterproductive, especially for notebooks qualified under PLI,” said a senior executive at an IT hardware brand.

“On one side, the government has asked the industry to populate the PCBs in India, but on the other side, you have to pay 30 per cent duty on import of bare PCB,” he said.

The executive further criticised the timing of the duty, implemented within the PLI scheme’s initial year, despite plans mandating local PCB production in subsequent years.

This situation forces brands to import bare PCBs due to proprietary design constraints, despite local manufacturers’ longer lead times compared to their Chinese counterparts, he said.

Although bare PCBs constitute a minor portion of manufacturing costs, averaging around $7 for notebook PCBs, the added expense is currently absorbed by manufacturers to sustain competitive pricing. Business Standard